I just finished listening to a particularly excellent episode of EconTalk (my second favorite podcast). Russ Roberts had his old friend Bryan Caplan on to talk about his new book, The Case Against Education, which I’ve been dipping in and out of in my copious free time. Caplan argues that higher education is largely a huge waste of time and resources because most people retain very little of the mostly useless (in the professional sense) stuff they are taught. Roberts is deeply skeptical, arguing that just because educational benefits are hard to measure, it doesn’t mean they don’t exist. Caplan thinks that if you can’t make a test to measure what you’ve learned, you probably haven’t learned it:

I would say if there is no designable test that can show that people learn something, then they haven’t learned it. You might say the test is bad, in which case I would say, “Fine. Design a better test, and then show it to me.” But, if you want to say that people have been transformed but it’s a way that no one can actually show, no matter how hard they try, then I’m going to say, “No. That just sounds like wishful thinking.”

I’m closer to the Roberts camp on this point but, overall, I’m more sympathetic to Caplan’s larger argument.

Caplan asks a great question: Would you rather have a degree from Princeton or would you rather have a Princeton education without the degree? As Caplan notes, the mere fact that this is a difficult question to answer gets to the heart of the problem (or at least one of the problems) with higher education today. After all, he says, if you were going to be stranded on a desert island, you’d rather have the education from a survival-skills course than a diploma but not the education?

Caplan says that diplomas from good schools serve as a signal to employers that a graduate will be productive:

How could such a lucrative investment be wasteful? The answer is a single word I want to burn into your mind: signaling. Even if what a student learned in school is utterly useless, employers will happily pay extra if their scholastic achievement provides information about their productivity.

This signaling phenomenon misleads us about the underlying importance of the education itself. I am very sympathetic to this argument. But I think it misses an important dynamic (which Caplan may well address in the book, but I haven’t found it yet).

Education is often less a signal for productivity than a hedge against risk (as I argued here). Caplan and Roberts spend a lot of time dissecting the question of whether education makes people affluent. There’s ample reason to be skeptical about that both on the macro and micro level. (The link between “investments” in education and economic growth is widely exaggerated.) That said, I think there’s a strong case that access to the social networks elite schools provide offers a significant return on the investment. In a world where “who you know” matters so much, going to Harvard has pay-offs even if you get straight Ds.

But back to the hedge point. Think of it this way. Even very affluent parents encourage their kids to become doctors and lawyers less because they want their kids to get rich, than because they want them to have a profession that ensures that they won’t be poor. Education provides an insurance policy — something to fall back on — not a winning lottery ticket.

Similarly, while I think employers — particularly big corporate ones — surely hope education is a signal for potential productivity, they also see it as a hedge against blame. It’s similar to the widespread practice of hiring management consultants. Mid- and upper-level managers often hire consultants less to fix a problem than to have a plausible excuse to avoid blame. “Hey, we hired McKinsey. We just did what they advised. They’re the best in the business. It’s not my fault.”

Hiring Ivy League kids may not guarantee big pay-offs, but it impresses the suits and gives managers an “objective” metric that looks good.

One problem with this dynamic is that it can become self-justifying and closed off. I’ve spoken at scores of colleges, and many of the students that have impressed me the most have been at community colleges, because they’re often paying their own way and are therefore far more determined to get value out of their education. But in the market place, they are at a huge disadvantage competing with kids from elite schools. Hiring a kid from a community college involves taking a risk when you have the choice of hiring a kid from an elite university. Add in the value of social networks and the biases in favor of hiring people you know or people from your own background, and the unseen barriers to talent can become daunting.